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The 2011 AP Microeconomics Exams Dave Anderson Centre College Chief Reader.

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Presentation on theme: "The 2011 AP Microeconomics Exams Dave Anderson Centre College Chief Reader."— Presentation transcript:

1 The 2011 AP Microeconomics Exams Dave Anderson Centre College Chief Reader

2 Agenda Exams Scores Good/Bad Spots Resources Discussion

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4 Microeconomics Committee Chair Pamela M. Schmitt, United States Naval Academy Michael A. Brody, Menlo School Committee Members Luis F. Fernandez, Oberlin College Margaret Ray, Mary Washington College Dee Mecham, The Bishops School Sandra K. Wright, Adlai E. Stevenson High School College Board Advisor Mary Kohelis, Brooke High School Chief Reader David Anderson, Centre College ETS Assessment Specialists Fekru Debebe Hwanwei Zhao

5 Exams Microeconomics 50,016 Operational Exams 7,600 Overseas Exams

6 Mean / Adjusted Mean / Max MICROECONOMICS 1.Monopoly Factor Market Negative Externality

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9 Scores Micro 514.6% 425.9% 321.6% 216.0% 121.9%

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11 Students Did Great On Firm and Market Graphs in Perfect Competition –P market = P firm –Interpreting shifts in S and D –Horizontal Demand Curve for Firm Profit Max Quantity where MR = MC Link between MFC and Q of Labor Hired

12 Top 10 Most Common Errors AP Economics 2011

13 Overview of Trouble Spots 11. Finding the Socially Optimal Quantity 10. Deadweight Loss from a Positive Externality 9. Allocative Efficiency 7. Price Elasticity of Demand 6. MFC and MRP in a Perfectly Competitive Labor Market 5. Effect of Price Ceiling on DWL 4. MR with a Price Ceiling 3. MFC with a Minimum Wage 2. Effect of Lump Sum Tax on DWL 1. Deadweight Loss from a Negative Externality Special Mention: Axis Labels!

14 11. Overseas Micro 2 (a)(ii) Question: Suppose research shows that the more college education individuals receive, the more responsible citizens they become and the less likely they are to commit crimes. (a)Draw a correctly labeled graph for the education market and show … (ii) The socially optimal quantity of education, labeled Q S.

15 PRICE Supply = Marginal Social Cost Quantity of Educations Demand = Marg. Private Ben. Marginal Social Benefit 0 PMPM QMQM QSQS Socially Optimal Quantity 36% answered correctly

16 10. Overseas Micro 2 (a)(iii) Question: Suppose research shows that the more college education individuals receive, the more responsible citizens they become and the less likely they are to commit crimes. (a)Draw a correctly labeled graph for the education market and show … (iii) Deadweight loss at the market equilibrium, completely shaded.

17 PRICE Supply = Marginal Social Cost Quantity of Educations Demand = Marg. Private Ben. Marginal Social Benefit 0 PMPM QMQM QSQS Deadweight loss from underproduction 33% answered correctly

18 9. Micro 1 (c) Question: Assume that the monopolist is maximizing profit. Is allocative efficiency achieved? Explain.

19 Micro 1 (c) Price Quantity Demand 0 Marginal Revenue Marginal Cost PMPM QMQM QSQS PSPS

20 9. Micro 1 (c) Answer: No, because P MC / D MC / MSB MSC. (33% answered correctly)

21 8. Micro 1 (g) Question: Assume instead that the monopolist practices perfect price discrimination (also called first-degree price discrimination). (ii) What will be the value of the consumer surplus?

22 Micro 1 (c) Price Quantity Demand 0 Marginal Cost QSQS PSPS

23 8. Micro 1 (g) Answer: Zero (because each customer is charged the most he or she is willing to pay, thus eliminating any consumer surplus). (28% answered correctly)

24 7. Micro 1 (d) Question: Between the prices of $16 and $18, is the monopolist in the elastic, inelastic, or unit elastic portion of its demand curve. Explain.

25 Micro 1 (d) Answer Price Quantity Demand 0 $16 Marginal Revenue $ Inelastic range

26 7. Micro 1 (d) Answer: Demand is inelastic because TR increases as price increases / MR is negative / the price elasticity is.74 < 1. 27% answered correctly

27 6. Micro 2 part (c) Question: Assume that avocado producers hire workers from a perfectly competitive labor market. Draw a graph of labor supply and demand for the typical firm and label the supply curve MFC and the demand curve MRP.

28 Micro 2 (c) Answer Wage Quantity of Labor MRP 0 W MFC QLQL 25.3% answered correctly

29 5. Overseas Micro 2 part (b) Question: Assume that the government imposes an effective (binding) price ceiling on the price of college education. (ii) Does this price ceiling increase, decrease, or have no impact on the deadweight loss in this industry? Explain.

30 PRICE Supply = Marginal Social Cost Quantity of Educations Demand = Marg. Private Ben. Marginal Social Benefit 0 PMPM QMQM QSQS Deadweight loss from underproduction

31 PRICE Supply = Marginal Social Cost Quantity of Educations Demand = Marg. Private Ben. Marginal Social Benefit 0 P Ceiling P1P1 PMPM QMQM QSQS QCQC

32 Answer: Deadweight loss will increase because the quantity supplied will decrease. (13 percent answered correctly) 5. Overseas Micro 2 part (b)

33 4. Micro 1 (f) Question: Assume that regulators impose a price ceiling of $22. What is the marginal revenue of the eighth unit?

34 Micro 1 (f) Price Quantity Demand 0 Marginal Revenue $22 9 Price ceiling 8 $24

35 Micro 1 (f) Price Quantity Demand 0 Marginal Revenue $22 9 Price ceiling

36 4. Micro 4 (f) Answer: $22. (12% answered correctly)

37 3. Overseas Micro 3 (c)(ii) Question: Identify the quantity of labor hired [by a monopsony when] the government imposes a minimum wage of $12.5. Explain.

38 Wage Supply of Labor Quantity of Labor Marginal Revenue Product Marginal Factor Cost

39 Wage Supply of Labor Quantity of Labor Marginal Revenue Product Marginal Factor Cost

40 3. Overseas Micro 3 (c)(ii) Answer: 150 units. (37% answered correctly) Explanation: Because the marginal factor cost curve becomes horizontal at the minimum wage up to a quantity of 150. (8% answered correctly)

41 2. Micro 3 (b) Question: Assume a lump-sum tax is imposed on the [perfectly competitive] producers of good X [known to create a negative externality]. What happens to the deadweight loss? Explain.

42 2. Micro 3 (b) Answer: There is no change because a lump sum tax does not affect marginal cost, so the quantity supplied remains the same. A discussion of firms exiting due to the lump sum tax and the resulting change in DWL is also acceptable. (6% answered correctly)

43 1. Micro 3 (a) Question: Draw a correctly labeled graph of the market for good X [known to create a negative externality] and show … (iv) The area of deadweight loss, shaded completely

44 PRICE Marginal Private Cost QUANTITY Demand = MSB QMQM Marginal Social Cost QSQS Deadweight loss from over production Market Quantity Answer: 4.1% answered correctly

45 Deadweight Loss with Negative Externalities Quantity levels less than or greater than the efficient quantity create efficiency losses (or deadweight losses). --McConnell, Brue, Flynn, 18e, p. 129 Diagrams similar to the previous slide: McConnell, Brue, Flynn, 19e, pp. 99 and 105 Parkin 5e, p. 117 This issue is discussed further in the Deadweight Loss Presentation.

46 Labels (many of which are wrong)– use whats in the text Pesos per Dollar Peso P P$ Price of $ V$ Value of $ Peso Peso per $ P = Peso $ in terms of peso Peso value of $ Peso price for $ Exchange rate Price in pesos Q pesos $/Peso PL FX/$ Value of Peso E.V. of Peso Peso in dollars $ vs. Pesos Price of $ / Peso Peso in relation to $ E

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